Question: Returns and Standard Deviations - Consider the following information: State of Economy Probability of State of Economy Rate of Return If State Occurs Stock A

Returns and Standard Deviations - Consider the following information:

State of Economy Probability of State of Economy Rate of Return If State Occurs
Stock A Stock B Stock C
Boom .10 .35 .45 .27
Good .60 .16 .10 .08
Poor .25 .01 .06 .04
Bust .05 .12 .20 .09

  1. Your portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the expected return of the portfolio?

  2. What is the variance of this portfolio? The standard deviation?

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